PAUL GUERRA: Hello, everyone, and welcome back. Here's why you should join today's Real Vision Crypto Daily Briefing. NASDAQ wants a piece of the crypto pie. One of the world's largest exchanges is getting into the crypto custody business. We'll explain what this means for the wider market, plus a deep dive into how the merge went and what happens now. Host of the Unchained Podcast Laura Shin gives her take as always we'll break down this conversation into key takeaways for you guys at the end so stay tuned for that. I'm Paul Guerra, and with me, as always, Ash Bennington is with me. How are you doing, Ash?
ASH BENNINGTON: I'm doing great, Paul. Last night, Messari Mainnet opening party. Late night, lots of caffeine this morning.
PAUL GUERRA: Oh, that sounds like fun. Messari, good stuff! Don't forget to subscribe. If you're watching this on YouTube, smash the Like button for the algorithm. And if you're hearing us on your favorite podcast platform, stay tuned for more. Now, let's jump right into the latest price action.
The total crypto market cap is above $930 trillion. All eyes are once again on the Fed. At 2:00 PM Eastern-- so in about four hours or so-- we'll find out what the next rate hike is, and markets generally expect another 75 basis points. This is important because cryptocurrencies have been very sensitive to rate hikes lately, and this has been impacting prices all over the market.
So far, the moves are subdued. Bitcoin is up slightly for the past 24 hours, and it's a little seesawing above and below $19,000, and its market dominance is around 39.5%. We might see a bigger move after the Fed announcement, as always. And in the meantime, MicroStrategy announced it bought another 301 Bitcoins. This means they hold now around 130,000 Bitcoins in total. This means also that Michael Saylor is balling. Ash, what about the Ethereum? How's it doing?
ASH BENNINGTON: A similar picture there, Paul. Investors appear to be in a wait and see mode, probably looking toward the Fed meeting, as everyone on Wall Street is this morning. Ethereum is up slightly for the past 24 hours, trading above $1,300. CoinDesk reports a Citi Research report stated that ETH has remained stable post-merge. It also says that issuance of new ETH is estimated to fall by 90% to around 600,000 a year. We'll touch on that later in the show. Finally, it notes that ETH is now a yield-bearing asset, so it puts the yield at 4.5%.
Separately, Decrypt reports data from OKlink that shows Ethereum miners dumped ETH at elevated levels last week. 17,000 was offloaded, Paul.
PAUL GUERRA: Wow, that's a lot of Ether. Thanks, Ash. Lots of changes under the hood for ETH following the merge. We'll discuss this in more detail later in the show.
But now, let's take a look at our top news story today. Well, which is a fresh vote of confidence in the crypto by Wall Street. NASDAQ, the company behind the world's second-largest exchange, has announced it is getting into crypto for the first time. The company will offer custody services for Bitcoin and Ethereum to institutions. Bloomberg reports that NASDAQ hired Ira Auerbach, who ran prime broker services at the crypto exchange Gemini, to head up with the NASDAQ New Digital Assets Unit. He told Bloomberg, quote, "We believe this next wave of the revolution is going to be driven by mass institutional adoption." Mass institutional adoption, end quote. Ash, bullish words from the man. Let's start with the basics, though. What's crypto custody?
ASH BENNINGTON: Well, in the simplest terms, "custody" is how people store and secure their own assets, whether it's digital assets like cryptocurrency or stocks and bonds. So traditional custodians in the modern era have stored, for example, stocks and bonds on behalf of their clients. What does that mean in crypto? When assets are stored on a blockchain, what it means is that crypto custodians store and guard private keys that you use to access your wallet, Paul.
PAUL GUERRA: Well, it seems it will be a fight for custody because the NASDAQ will have to compete with Coinbase, BitGo, Anchorage, among others. for those institutional clients. But NASDAQ is a big brand. What do you make of this story, Ash?
ASH BENNINGTON: Well, it's interesting. NASDAQ, obviously, has a reputation of being a high-tech exchange, particularly in the wake of the first Web1 revolution. NASDAQ was where all the hot stocks traded in the '90s and the 2000s. Lots still trade there today.
It's almost kind of like a passing-of-the-torch kind of moment here, essentially, where you see an exchange like NASDAQ getting involved in the crypto custody business. It suggests that we're seeing more mainstream adoption-- I think as the quote said, more institutional adoption, or at least interest around digital assets and around institutional adoption. And the desire, the quest to custody those assets and to trade them securely, I think it's probably a bullish sign, on balance, for the crypto space. But, obviously, lots of stories on any given day. I'm sure we've got some negative ones coming up, Paul.
ASH BENNINGTON: Oh, yeah, yeah. Wow, you're a wizard. But well, that was actually positive news there. But yes, now, let's take a look at an equally important but less optimistic story. And here it is.
Another day, another DeFi hack. Crypto market maker Wintemute has confirmed it's lost $160 million. The company says the hack was confined to its DeFI business, and it says its lending and over-the-counter services, or the CFI exchange, were not affected. The CEO says Wintemute remains solvent, with more than twice the amount stolen left in equity. He also said they're treating this as a wide hack attack. Early reports suggest the hack was sophisticated, but details remain scarce. Ash, can you please explain how a crypto market maker operates?
ASH BENNINGTON: Sure, Paul. If you want to buy something or sell something, you need to obviously match those buyers and sellers, and you need to provide liquidity. You can think of liquidity in the simplest terms as a kind of inventory for buyers and sellers of financial products. If you don't have adequate inventory or liquidity, it means you get inefficient pricing, what that means is that it costs you more to buy. It costs you more to sell. The idea is to aggregate this liquidity to match buyers and sellers and to have efficient price discovery in markets, Paul.
PAUL GUERRA: Thank you, Ash. Well, it's not the first time that a DeFi hack has been reported on this show. What do you make of this?
ASH BENNINGTON: This isn't even the first security event involving Wintermute. Gizmodo reported in June that the market-maker saw about $20 million initially disappear after a wrong crypto address was used in a transaction. It was a series of unfortunate events, so to speak, that led to this. But the story has a mostly happy ending, which is that the hackers returned most of the stolen funds.
What's interesting to me is that according to CoinDesk, Wintemute is still calling this a white hat attack, which may-- may-- signal that they hope to get at least some portion of their assets back. This is an unusual space, as people know who follow this show and the other work that we do here on Real Vision, that occasionally, you have these white hat attacks-- so-called "white hat" attacks-- where people want the recognition of being able to penetrate a protocol or penetrate an exchange, and then they give the funds back. I imagine that is what they are hoping is going to happen over at Wintermute.
Look, we've said this before here, just a little bit more broadly to talk about a little context around DeFi. These hacks are regular occurrences in the space. Whether they're flash loans, or bridge hacks, these are regular events in the space. It's this weird sort of space that we're in where we look at DeFi, many of the smartest people in the industry think that this is going to be the future of the way assets are traded.
Not just digital assets. There's a lot of optimism around being able to trade traditional assets, capital markets assets like stocks and bonds on trade. But the reality is these security challenges are considerable. They are consistent. We see significant-- see significant hacks happen in the space all the time-- tens of millions of dollars, hundreds of millions of dollars. Unfortunately, this is just another example, Paul. And unfortunately, I suspect it's probably not the last we're going to be reporting on.
ASH BENNINGTON: It will not be the last, that's for sure. Another news story we want to look at is an announcement from Coinbase. The company is integrating its Coinbase Wallet browser extension with the ENS, which is the Ethereum Name Service, an Ethereum-based domain that replaces your wallet address. You know that long line of numbers and letters that is impossible to remember? Well, that one.
So Coinbase will hand out free ENS usernames to its customers, and they will be formatted with the name, .cb for Coinbase, .id. So Ash, Coinbase says that this is a big step towards making Web3 simple, to make it accessible for everyone. What are your thoughts?
ASH BENNINGTON: Well, Paul, I think it's a cool story. User interface, user experience is a significant challenge in crypto. It's much too complicated. I think this is a step in the right direction. I think that's probably true. I registered ashbennington.eth, I think, over a year ago, and I got ENS tokens Airdropped to me, just in terms of full disclosure here. Not why I did it at the time. We didn't know we were going to get the tokens Airdropped. I just did it because I thought it was cool, for exactly the reasons that you talked about.
Obviously, long strings of alphanumeric characters are very difficult to remember. It's easy to remember ashbennington.eth. I also think it's interesting that CoinDesk is branding this by prepending "CB" before the addresses. That's smart. It basically allows them to have some branding in the space in addition to helping their customers have more easily recognizable names. I think this is kind of a cool story, and it seems like a step in the right direction broadly speaking, Paul.
PAUL GUERRA: Yeah, it seems also like a great marketing move to have a CB attached to every single address so everyone will see the CB and go, what is this? Oh, it's Coinbase. What is that? So yeah, a great marketing move, also.
And speaking of Ethereum, there was actually this tiny little event lately, Ash. I don't if you remember it. It happened, I think, a few days ago. It was the Merge. It was one of the most complicated and anticipated operations in crypto history. By and large, it's been considered a big success so far, and our Elaine Ly Spoke with Laura Shin about it.
Laura is a journalist, author, and host of the Unchained Podcast. You can also check out her book-- which is great, by the way-- The Cryptopians: Idealism, Greed, Lies, and the Making of the First Big Cryptocurrency Craze. Here's how she described the big day.
ELAINE LY: What was your reaction when the Merge was successful? Were you one of the ones who stayed up very late to watch it happen?
LAURA SHIN: I kind of cheated. [LAUGHS] I went to bed at a normal time, and then I sent my alarm. And I have to say, I projected quite well because there wasn't a specific time. But I managed to wake up basically right before it happened and witnessed it.
And knowing that Ethereum had been working on it for years, and, in fact, it was so technically challenging that they'd had to delay it a number of times. And ultimately, the reason it's called "the Merge" is they felt the safest way to make this happen would be to just get a proof of stake chain going just make sure that worked, and then the task of moving all the economic activity on Ethereum-- which really just has grown so much bigger-- and then shifting that over it was, as you've probably heard, similar to swapping out the engine on a plane mid-flight.
And the fact that it went off seamlessly, I think it really shows how much homework and deliberation they put into it. They did a number of test merges. They realized, OK, these are working well. They Debugged and they tweaked things.
And then, the fact that it basically was flawless, the fact that it was uneventful, and how seamless it just went from block to block, I think, really shows that the delays were worth it, that all the extra research and the careful planning of the Beacon chain and getting that going was a smart move.
ELAINE LY: Yes, more baby steps. But no news is good news, as they say.
PAUL GUERRA: Well, no news is good news. The Merge was a major technical achievement that took years to come true. And the fact that they made it uneventful is nothing but remarkable. Ash, what are your thoughts about this?
ASH BENNINGTON: I mean, Laura Shin, she's the ultimate crypto podcast OG. She does a great job of describing the complexity of the Merge here, and why the Merge is called the Merge, because the economic activity on the main chain was being merged with a so-called Beacon chain. This was the pilot chain for proof of stake. All in a nice simple description all around here by Laura.
PAUL GUERRA: That's very right. And the move to the upside for ETH many hoped for has not materialized yet. In fact, on the contrary, we've seen ETH's prices dropping a little. So let's hear Laura, expectations on the way forward.
ELAINE LY: This is known as one of the biggest success stories for the Ethereum network. But for investors, prices do look worrying this week. Now that the Merge has happened, where do we go from here? Has the dust been settled?
LAURA SHIN: So I would say that for anyone looking to put their money in any crypto, you need to understand how that crypto works, and you need to understand how that fits with your own personal financial goals and your own financial picture. And so what I'm going to say here is very general. It should not be taken as financial advice for anybody. But regardless of the macro environment. the truth is, just leaving that aside, that the monetary policy of Ethereum has changed dramatically and in a way that many investors view as something positive.
Until this point, Ethereum had a monetary policy of just inflating the supply of ETH. And that was used to basically pay miners who were [INAUDIBLE]. The issuance has dropped dramatically from about 5% inflation to about 0.5%. And on top of that, there is a change that actually happened a little over a year ago called EIP-1559, and that also changed how usage of the network is tied to the value of Ether.
And so now, basically, the more popular Ethereum becomes and the more demand that there is on the network, the higher the value of ETH could be. Because what's going to happen is that demand will make-- will cause certain fees to be burned. And when you consider that there's this decreased issue, actually, even more will be burned than is being issued.
And so throughout the last year or so, ever since EIP-1559 went through, there's been a website called ultrasound.money. And they have a little meter where they would compare the usage on the network at the time, and then you could toggle a little switch to see, OK, if we were to simulate this in a post-Merge environment, where this new policy is in place of burning the fees a certain way and then the dramatically reduced issuance, then what would ETH be inflationary or, sorry, deflationary with this amount of usage? And it would show you different times. It'd be like, oh, this amount of ETH would be burned if there was this amount of usage.
Interestingly, right before the merge, for like the month or so before, despite the new change, it was actually still slightly inflationary because demand on the network has fallen. So that's why I'm not saying it's definitely going to be deflationary from here on out. Like I said, it'll depend on the usage. But regardless, the issuance of Ethereum has drastically dropped, and that's why you'll see popular crypto investors such as Arthur Hayes-- who previously was an investment banker, and he also was the co-founder and CEO of BitMEX-- he's very bullish on Ethereum.
And you can read-- he has an amazing blog. But he always just boils it down to that simple thing. And I think for people who just want a simple explanation, that is what you should pay attention to.
ELAINE LY: I love that. And this is still a website that we can pop in and have a little play around now.
LAURA SHIN: Yeah, and now that I think about it, I haven't checked it since the Merge-- which, at the time of the Merge, there was so much demand on it, you often couldn't even pull it up. So I don't what they did with the little toggling thing now. Maybe it's just gone.
PAUL GUERRA: It seems that Laura is referring to a supply shock happening with Ether. Ash, could you please elaborate on the [INAUDIBLE] burn mechanism and why this deflationary system is so important?
ASH BENNINGTON: So EIP-1559-- that's Ethereum improvement Protocol-1559-- details how mining fees are split into base fees and tips, and also how the burn mechanism works. I think that's probably pretty technical stuff and not of incredible interest to our audience. But what I think is more interesting to hear is why, post-Merge, Ethereum's monetary system is now deflationary rather than inflationary.
And that's this, Paul. In the simplest terms, it's because ETH staking is more efficient in terms of cost and in terms of energy than ETH mining. So because staking is more efficient than mining, validators spend less than miners, which means they require less compensation because their costs are lower. Therefore, fewer Ethereum need to be created to pay them.
Probably a bit of an oversimplification, but that's how I think about it. The monetary base is expanding more slowly because there's less need to pay miners. It's a more efficient system, and therefore, you don't need the massive monetary expansion to keep the system going, Paul.
PAUL GUERRA: Awesome, Ash, and don't worry about oversimplifying things. We actually love it. You're our filter to enlighten us with your insights. So we appreciate it.
And, of course, Ethereum does not operate in a vacuum. So what happens here is that people are watching-- specifically, people, sometimes, from the Bitcoin community-- and the Merge begets this question. Could Bitcoin transfer from proof of work to proof of stake? Let's hear what Laura thinks about this
ELAINE LY: Talking about Ethereum, which is the world's second most valuable crypto asset, we have to talk about Bitcoin as well. Does this advancement of ETH moving to proof of stake affect BTC at all? What have you seen on the community, what they're saying there?
LAURA SHIN: So interestingly, I think most Bitcoiners would say, no, it does not affect Bitcoin. We will never switch to proof of stake. However, I